The so-called ‘zero rate’ allows automakers around the world to demand refunds on the taxes they pay, an incentive the SAT seeks to eliminate.
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Raquel Buenrostro , head of the Tax Administration Service (SAT) , announced a proposal to reduce the tax exemption among car manufacturers . The entity intends to eliminate several of the tax incentives that these companies enjoy when they are established in Mexico. Among these would be the so-called ‘zero rate’ of taxes , which allows automotive companies around the world to demand refunds on the taxes they pay in the country.
The proposal is part of a package of measures to increase tax collection by 1% of gross domestic product (GDP) next year. Buenrostro explained that at the moment the initiative is awaiting approval by the Ministry of Finance and Public Credit . It should be remembered that these benefits are a key hook for international car manufacturers to produce their vehicles in Mexico.
“Mexico has been left out of the multilateral agreements for the distribution of income tax entered into by car manufacturers. We are making an effort to correct all these agreements because we also participate in an important way in the supply chain and we want a proportion of the income tax ” , declared Buenrostro in an interview with Bloomberg .
Will taxes make auto factories leave Mexico?
The official revealed that last year she spoke with an automobile company, which threatened to withdraw from the country if these tax privileges are modified. However, Buenrostro is convinced that the tax changes would not affect auto investment in Mexico.
“The threat is not credible,” said the SAT chief. “I told him, ‘I’m not sure his parent company will be very happy if he leaves, because we see his numbers, and he’s not going to have numbers like that anywhere in the world .”
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Past administrations implemented various tax incentives in recent years to attract new investment from auto giants such as Toyota Motor Corp and General Motors Co. The strategy positioned Mexico as the fourth largest auto exporter in the world.
“Those incentives must end. We are going to debug all of these. We have to see what were the incentives that the government gave at that time so that they could bring in the investment, but once that investment is recovered, it makes no sense to maintain them , “Buenrostro told the outlet.
The new tax reform, key to the refinancing of Pemex
The official commented that the newly appointed Secretary of Finance and Public Credit , Rogelio Ramírez de la O , will give priority to the refinancing of Petróleos Mexicanos, since “Pemex’s debt is more expensive than sovereign debt” and is one of the projects that President Andrés Manuel López Obrador has been at the table “for a long, long, long time .”
As part of this new tax reform, they will also seek to eliminate the loopholes that, it has detected, allow manufacturers that export most of their products to avoid paying taxes on products sold in Mexico.